Japanese Industry Holds
Dueling Views of China

Economic Relationship Presents
Opportunity, Market Challenges

TOKYO -- When a group of Japanese towel makers lobbied their government two years ago to curb imports from China, Toshihiro Yagi, president of closely held towel maker Toyo Teri, refused to go along.

Instead, Mr. Yagi tendered his resignation to the towel makers trade group and led a smaller group of manufacturers in demonstrations against import restrictions. Mr. Yagi saw the threat from China coming years earlier and set up a factory there in 1991, so any sanctions on imports from China would hurt his business. He argued...